When a philanthropist gives a substantial donation to an institution, there is often a donor agreement entered into between the philanthropist and the institution. Do these donor agreements contain:
- a confidentiality clause;
- a clause prohibiting or restricting registration of the donor agreement on the title to the institution's land; or
- a postponement clause stipulating that agreements with the municipality for site plan approval or development approval, or rights-of-way, or mortgages have priority over the donor agreement?
Do donor agreements contemplate the potential impact of such agreements being registered in the land registry office and thus becoming public documents? Will the institution be harmed if a donor agreement is registered in the land registry office? For example, would other major donors be upset if their agreements with the institution were not as favourable? Would publication of sensitive portions of the donor agreement in the press embarrass the institution? Would there be priority issues with other registered agreements?
Section 71 of the Land Titles Act (Ontario) stipulates that:
Any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by any act of the registered owner by entering on the register… notices, cautions, inhibitions or other restrictions….
If a donor agreement affects real estate, the donor is able to register the agreement in the applicable land registry office against the title to the institution's applicable land. Unless the donor agreement contains a restriction on registration, the donor is able to register the donor agreement without the consent of the institution.
Not all donor agreements affect real estate but the following are examples where real estate is affected:
- The donor is given signage rights (e.g. part or all of a building is named after the donor); or
- The donor negotiates restrictions on naming rights (e.g. the donor agreement stipulates that the building is to be named after the donor and no other names are to be shown on the building); or
- The donor negotiates restrictions on the use of the property (e.g. the donor agreement stipulates that the property may not be used except for a specific purpose); or
- The donor is given a right to personally use part of a building (e.g. an office); or
- There is a provision in the donor agreement stipulating the donation is to pay for a renovation that is to be kept intact for a stipulated number of years; or
- There is a provision in the donor agreement stipulating that the owner permits the institution to use or display the donor's personal property for a period of time in the building (e.g. furniture or a painting) but without transferring the ownership of the item.
An institution could do one of the following to control registration of donor agreements:
- Include a confidentiality clause in the donor agreement so that the provisions of the donor agreement are not to be made public and, in addition, a clause specifically prohibiting registration of the donor agreement or notice of the donor agreement.
- Include a limited confidentiality clause in the donor agreement so there can be disclosure of certain non-sensitive provisions and include a clause prohibiting registration unless the institution reviews and approves the contents and form of the document being registered. The donor agreement might contain an acceptable short form of document for registration with provisions of the donor agreement affecting the real estate but redacting other sensitive provisions of the donor agreement.
- In addition, the donor agreement might contain a postponement clause stipulating that the donor agreement is to be subordinate to and postponed to any agreements with the municipality (such as site plan agreements or development agreements), any easements (such as rights-of-way) or any mortgages.
When negotiating and finalizing donor agreements, it is a good idea to consider the ramifications of registration in the land registry office.